SMALL BUSINESS 

RESEARCH 

PROGRAMS

Actions Needed to 

Improve Compliance 

with Spending and 

Reporting 

Requirements

Report to Congressional Committees

September 2013

GAO-13-421

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-13-421, a report to 

congressional committees

September 2013

SMALL BUSINESS RESEARCH PROGRAMS

Actions Needed to Improve Compliance with 

Spending and Reporting Requirements

Why GAO Did This Study

The Small Business Act established 

the SBIR and STTR programs to use 

small businesses to meet federal R&D 

needs. The law mandates that 

agencies, with extramural R&D 

budgets that meet the thresholds for 

participation, must spend a percentage 

of these annual budgets on the SBIR 

and STTR programs. The agencies are 

to report on their activities to SBA and, 

in turn, SBA is to report to Congress. 

Eleven agencies participate in SBIR, 

and five of them also participate in 

STTR. The act’s 2011 reauthorization 

mandates that GAO review SBA’s and 

the agencies’ compliance with 

spending and reporting requirements, 

and other program aspects, for fiscal 

years 2006 to 2011. GAO determined 

(1) the extent to which participating 

agencies complied with spending 

requirements and how the agencies 

calculated these requirements, (2) the 

extent to which participating agencies 

and SBA complied with certain 

reporting requirements, (3) the 

potential effects of basing the spending 

requirements on an agency’s total R&D 

budget, and (4) the cost to participating 

agencies of SBIR and STTR program 

administration. GAO reviewed agency 

calculations of spending requirements 

and the required reports and 

interviewed SBA and participating 

agency program and financial officials.

What GAO Recommends

GAO recommends, among other 

things, that SBA provide additional 

guidance to agencies for spending and 

reporting requirements and provide 

Congress with a more timely annual 

report with more analysis of the 

agencies' methodologies. SBA stated 

that it agrees with the 

recommendations and will implement 

them. 

What GAO Found

Using data agencies had reported to the Small Business Administration (SBA), 

GAO found that 8 of the 11 agencies participating in the Small Business 

Innovation Research (SBIR) program and 4 of the 5 agencies participating in the 

Small Business Technology Transfer (STTR) program did not consistently 

comply with spending requirements for fiscal years 2006 to 2011. In calculating 

their annual spending requirements for these programs, some agencies made 

improper exclusions from their extramural research and development (R&D) 

budgets and used differing methodologies. SBA, which oversees the programs, 

provided guidance in policy directives for agencies on calculating these 

requirements, but the directives do not provide guidance on calculating the 

requirements when appropriations are late and spending is delayed, resulting in 

agencies using differing methodologies. This made it difficult to determine 

whether agencies’ calculations were correct. Without further SBA guidance, 

agencies will likely continue calculating spending requirements in differing ways. 

The participating agencies and SBA have not consistently complied with certain 

program reporting requirements. For example, in their methodology reports to 

SBA, the agencies submitted different levels of detail on their methodologies, 

such as the programs excluded from the extramural budget and the reasons for 

the exclusions. SBA’s guidance states that the methodology reports are to 

itemize each R&D program excluded from the calculation of the agency’s 

extramural budget and explain why a program is excluded but does not specify 

the format of the methodology reports to ensure consistency. Also, SBA’s annual 

reports to Congress contained limited analysis of the agencies’ methodologies, 

often not including information on particular agencies. Without more guidance to 

agencies on the formats of their methodology reports and more analysis of the 

contents of those reports, SBA cannot provide Congress with information on the 

extent to which agencies are reporting what is required. Further, SBA has not 

submitted an annual report on these programs for fiscal years 2009 to 2011 but 

plans to submit the reports to Congress later in 2013—making the data available 

to Congress on the programs 2 to 4 years late.

Potential effects of basing each participating agency’s spending requirement on 

its total R&D budget instead of its extramural R&D budget include an increase in 

the amount of the spending requirement—for some agencies more than others—

depending on how much of the agency’s R&D budget is composed of extramural 

spending. Also, if the thresholds of the spending requirements for participation in 

the programs did not change, changing the base to an agency’s total R&D 

budget would increase the number of agencies required to participate.

The agencies’ cost of administering the programs could not be determined 

because the agencies have not consistently tracked that cost as they are not 

required to by the authorizing legislation of the programs. Nine of the 11 

agencies in SBIR provided GAO with estimates of some of these costs for fiscal 

year 2011—most of which were for salaries and expenses. With the start of a 

pilot program allowing agencies to use up to 3 percent of SBIR program funds for 

administrative costs in 2013, SBA plans to require agencies to track and report 

administrative costs paid from program funds. 

View GAO-13-421. For more information, 

contact Frank Rusco at (202) 512-3841 or 

ruscof@gao.gov
Page i GAO-13-421 Small Business Research Programs

Letter 1 

Background 5

Data Indicate Most Agencies Have Not Consistently Complied with 

Mandated Requirements, Because of Improper Exclusions and 

Differing Methodologies 8

Agencies and SBA Have Not Consistently Complied with Certain 

Reporting Requirements 14

Basing Spending Requirements on Agencies’ Total R&D Budgets 

Could Increase Spending and Program Participation 19

Agencies’ Cost for the Administration of the Programs Cannot 

Currently Be Determined Because the Agencies Do Not Identify 

or Track All Costs 23

Conclusions 27

Recommendations for Executive Action 28

Agency Comments 29

Appendix I Comparison of Participating Agencies’ Reported 

Requirements and Spending for the SBIR and STTR 

Programs, Fiscal Years 2006 to 2011 32

Appendix II Analysis of Alternative Scenarios for Basing SBIR and STTR 

Spending Requirements on Total R&D Budget 49

Appendix III Description of SBIR and STTR Administrative Cost Data 

Obtained from the Participating Agencies 52

Appendix IV GAO Contact and Staff Acknowledgments 55

Tables

Table 1: Performance of Agencies in Meeting Small Business 

Innovation Research (SBIR) Spending Requirements 

Aggregated over Fiscal Years 2006 to 2011 10

Contents 
Page ii GAO-13-421 Small Business Research Programs

Table 2: Performance of Agencies in Meeting Small Business 

Technology Transfer (STTR) Spending Requirements 

Aggregated over Fiscal Years 2006 to 2011 11

Table 3: Comparison of Fiscal Year 2011 Small Business Innovation 

Research (SBIR) and Small Business Technology Transfer 

(STTR) Programs’ Spending Requirements under the 

Current Law and If Based on the Participating Agencies’ 

Total R&D Budget 19

Table 4: Additional Agencies That Would Participate in the Small 

Business Innovation Research (SBIR) and Small Business 

Technology Transfer (STTR) Programs if the 2011 Base 

Were Revised to Total R&D Budget Authority 23

Table 5: Summary of Alternative Scenarios to Illustrate the 

Potential Effects of Calculating Small Business Innovation 

Research (SBIR) and Small Business Technology Transfer 

(STTR) Program Expenditure Requirements on an 

Agency’s Total R&D Budget Instead of Its Extramural R&D 

Budget 50

Table 6: Comparison of Fiscal year 2011 Small Business Innovation 

Research (SBIR) Spending Requirements under the 

Current Law and the Three Alternative Scenarios 50

Figures

Figure 1: Number of Years Agencies Met Spending Requirements 

for the Small Business Innovation Research (SBIR) and 

Small Business Technology Transfer (STTR) Programs for 

Fiscal Years 2006 to 2011 9

Figure 2: Comparison of the Department of Agriculture’s Reported 

Spending Requirements and Spending for the Small 

Business Innovation Research (SBIR) Program, Fiscal 

Years 2006 to 2011 33

Figure 3: Comparison of the Department of Commerce’s Reported 

Spending Requirements and Spending for the Small 

Business Innovation Research (SBIR) Program, Fiscal 

Years 2006 to 2011 34

Figure 4: Comparison of DOD’s Reported Spending Requirements 

and Spending for the Small Business Innovation Research 

(SBIR) Program, Fiscal Years 2006 to 2011 35

Figure 5: Comparison of the Department of Education’s Reported 

Spending Requirements and Spending for the Small 
Page iii GAO-13-421 Small Business Research Programs

Business Innovation Research (SBIR) Program, Fiscal 

Years 2006 to 2011 36

Figure 6: Comparison of the Department of Energy’s (DOE) 

Reported Spending Requirements and Spending for the 

Small Business Innovation Research (SBIR) Program, 

Fiscal Years 2006 to 2011 37

Figure 7: Comparison of the Department of Health and Human 

Services’ Reported Spending Requirements and Spending 

for the Small Business Innovation Research (SBIR) 

Program, Fiscal Years 2006 to 2011 38

Figure 8: Comparison of the Department of Homeland Security’s 

Reported Spending Requirements and Spending for the 

Small Business Innovation Research (SBIR) Program, 

Fiscal Years 2006 to 2011 39

Figure 9: Comparison of the Department of Transportation’s 

Reported Spending Requirements and Spending for the 

Small Business Innovation Research (SBIR) Program, 

Fiscal Years 2006 to 2011 40

Figure 10: Comparison of the Environmental Protection Agency’s 

(EPA) Reported Spending Requirements and Spending for 

the Small Business Innovation Research (SBIR) Program, 

Fiscal Years 2006 to 2011 41

Figure 11: Comparison of National Aeronautics and Space 

Administration’s (NASA) Reported Spending 

Requirements and Spending for the Small Business 

Innovation Research (SBIR) Program, Fiscal Years 2006 to 

2011 42

Figure 12: Comparison of the National Science Foundation’s (NSF) 

Reported Spending Requirements and Spending for the 

Small Business Innovation Research (SBIR) Program, 

Fiscal Years 2006 to 2011 43

Figure 13: Comparison of DOD’s Reported Spending Requirements 

and Spending for the Small Business Technology Transfer 

(STTR) Program, Fiscal Years 2006 to 2011 44

Figure 14: Comparison of the Department of Energy’s (DOE) 

Reported Spending Requirements and Spending for the 

Small Business Technology Transfer (STTR) Program, 

Fiscal Years 2006 to 2011 45

Figure 15: Comparison of the Department of Health and Human 

Services’ (HHS) Reported Spending Requirements and 

Spending for the Small Business Technology Transfer 

(STTR) Program, Fiscal Years 2006 to 2011 46
Page iv GAO-13-421 Small Business Research Programs

Figure 16: Comparison of National Aeronautics and Space 

Administration’s (NASA) Reported Spending 

Requirements and Spending for the Small Business 

Technology Transfer (STTR) Program, Fiscal Years 2006 

to 2011 47

Figure 17: Comparison of the National Science Foundation’s (NSF) 

Reported Spending Requirements and Spending for the 

Small Business Technology Transfer (STTR) Program, 

Fiscal Years 2006 to 2011 48

Abbreviations

DHS Department of Homeland Security

DOD Department of Defense

DOE Department of Energy

DOT Department of Transportation

EPA Environmental Protection Agency

FTE full time equivalent

HHS Department of Health and Human Services

VA Department of Veterans Affairs

NASA National Aeronautics and Space Administration

NIH National Institutes of Health

NIST National Institute of Standards and Technology

NOAA National Oceanic and Atmospheric Administration 

NSF National Science Foundation

R&D research and development

SBA Small Business Administration

SBIR Small Business Innovation Research

STTR Small Business Technology Transfer

USDA U.S. Department of Agriculture

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Page 1 GAO-13-421 Small Business Research Programs

441 G St. N.W.

Washington, DC 20548

September 9, 2013

Congressional Committees

Small businesses are a major driver of high-technology innovation and 

economic growth in the United States, generating significant employment, 

new markets, and high-growth industries, according to the National 

Academy of Sciences.1 The Small Business Innovation Research (SBIR) 

and Small Business Technology Transfer (STTR) programs target small 

businesses for federal research or research and development (R&D) 

funding to develop and commercialize innovative technologies.2 The 

SBIR and STTR programs, managed by the Small Business 

Administration (SBA), were established in 1982 and 1992, respectively, in 

amendments to the Small Business Act. Most recently, these programs 

were reauthorized through September 30, 2017, by the National Defense 

Authorization Act for Fiscal Year 2012.3

Every federal agency4 with a budget of $100 million or more for 

extramural R&D—which is generally conducted by nonfederal 

employees—is required to establish and operate an SBIR program, while 

every federal agency with a budget of $1 billion or more for extramural 

R&D is required to establish and operate an STTR program.5 The Small 

Business Act increases the minimum portion of an agency’s R&D 

extramural budget that must be spent, with the SBIR funding percentage 

increasing from the 1997 to 2011 rate of not less than 2.5 percent to 2.6 

percent in 2012 and to 3.2 percent in 2017 and beyond, and the STTR 

funding percentage increasing from 0.3 percent in 2004 to 2011 to 0.45 

percent in 2016 and beyond.6

 

1

National Research Council, An Assessment of the SBIR Program (Washington, D.C.: 

National Academies Press, 2008).

From the programs’ inception dates 

2

In this report, we refer to research or research and development activities as R&D.

3

Pub. L. No. 112-81, Title LI, 125 Stat. 1823 (2011).

4

In this report we refer to federal departments and agencies as agencies.

5

The act defines “extramural budget” to generally mean the sum of the agency’s total 

research obligations minus amounts obligated for research activities by employees of the 

agency in or through government-owned, government-operated facilities.

6

In this report we refer to the amounts resulting from applying these minimum percentages 

to extramural R&D budgets as “spending requirements.” 

 
 

Page 2 GAO-13-421 Small Business Research Programs

through fiscal year 2011, federal agencies made about 126,000 awards 

under the SBIR program totaling about $30.4 billion and about 9,000 

awards under the STTR program totaling about $2.3 billion.

Currently, 11 agencies participate in SBIR programs: the U.S. 

Department of Agriculture (USDA); the Departments of Commerce 

(Commerce), Defense (DOD), Education (Education), Energy (DOE), 

Health and Human Services (HHS), Homeland Security (DHS), and 

Transportation (DOT); the Environmental Protection Agency (EPA); the 

National Aeronautics and Space Administration (NASA); and the National 

Science Foundation (NSF). Of these agencies, 5 also participate in the 

STTR program: DOD, DOE, HHS, NASA, and NSF.

The Small Business Act sets certain reporting requirements for 

participating agencies and SBA. Among other things, such agencies are 

to report to SBA on their methodology for calculating extramural R&D 

spending requirements within 4 months of enactment of their annual 

appropriations. Agencies are also directed to submit annual reports to 

SBA on their SBIR and STTR spending requirements and the amount 

spent after the end of each fiscal year. Furthermore, SBA is to annually 

report to Congress on all the participating agencies’ SBIR and STTR 

programs, including an analysis of the agencies’ budget calculation 

methodologies. The act also created a pilot program beginning in fiscal 

year 2013 that would allow a portion of SBIR program funds to be used 

for administrative costs, outreach and technical assistance, contract 

processing, and other specified purposes.7

In addition, the Small Business Act mandates that GAO review the 

participating agencies’ compliance with spending and reporting 

requirements for the programs for fiscal years 2006 to 2011, as well as 

other aspects of the programs.

Agencies are otherwise 

generally not permitted to spend program funds on administrative costs.

8

 

7

An agency may not use funds for the specified purposes until after the effective date of 

SBA-established performance criteria to measure any benefits of using funds for these 

purposes.

Our objectives were to determine (1) the 

extent to which the participating agencies complied with the programs’ 

spending requirements and how they calculated these requirements, (2) 

8

National Defense Authorization Act for Fiscal Year 2012, Pub. L. No. 112-81, 125 Stat. 

1298, § 5136. 
 

Page 3 GAO-13-421 Small Business Research Programs

the extent to which participating agencies and SBA have complied with 

certain reporting requirements, (3) the potential effects of basing the 

spending requirements for the SBIR and STTR programs on an agency’s 

total R&D budget instead of its extramural R&D budget, and (4) the cost 

to participating agencies of SBIR and STTR program administration and 

how agency funds were used to cover these costs.

To gather information on both programs, we reviewed the laws governing 

the programs and the guidance that the SBA has issued regarding the 

programs. We reviewed prior GAO, SBA Inspector General, and other 

reports related to the programs. We also met with the SBA’s SBIR and 

STTR program staff and interviewed program and financial management 

officials at each of the 11 agencies participating in SBIR. To determine 

the extent to which participating agencies have complied with the 

programs’ spending requirements, we compared spending requirements 

for fiscal years 2006 to 2011 with the amounts agencies reported 

spending in each annual report to SBA. We determined that an agency 

met its spending requirement if the agency’s reported spending for these 

programs was equal to or greater than the reported spending 

requirement. We used the agencies’ obligations data to represent 

spending for the programs in part because obligations data were readily 

available from each of the agencies for program purposes, and 

obligations provided a reasonable measure of the spending for the 

programs in each year. In addition, we collected data and documents 

from agencies and interviewed agency officials about how they calculated 

their extramural R&D budgets, including any amounts agencies are 

authorized to exclude from those budgets. To assess the reliability of the 

spending data, we questioned agency officials about the source and data 

quality control procedures and reviewed relevant documentation. We 

determined that these spending data were sufficiently reliable for the 

purposes of this report.

To determine the extent to which participating agencies and SBA have 

complied with certain reporting requirements for calculating their 

extramural research budgets, we compared the agencies’ methodology 

and annual reports to SBA and SBA’s annual report to Congress for fiscal 

years 2006 to 2011, to the extent available, with requirements in the 
 

Page 4 GAO-13-421 Small Business Research Programs

Small Business Act and SBA’s related policy directives.9

To determine the potential effects of basing spending requirements for 

the SBIR and STTR programs on an agency’s total R&D budget, we used 

actual data on total R&D budget authority from the President’s budget to 

calculate potential spending requirements for each federal agency for 

fiscal years 2006-2011.

We sought 

documentation of SBA’s review and analysis of the methodology reports 

and copies of SBA’s annual reports to Congress on the SBIR and STTR 

programs to determine the extent to which SBA carried out the mandated 

analysis of methodologies and publication of results in its annual reports.

10

 

9

The prior and current policy directives citations are: Small Business Administration, The 

Small Business Innovation Research (SBIR) Program Policy Directive, (Washington, DC.: 

2005); Small Business Administration, The Small Business Innovation Research (SBIR) 

Program Policy Directive, (Washington, DC.: 2012); Small Business Administration, The 

Small Business Technology Transfer (STTR) Program Policy Directive, (Washington, DC.: 

2005); and Small Business Administration, The Small Business Technology Transfer 

(STTR) Program Policy Directive, (Washington, DC.: 2012).

In calculating these potential spending 

requirements, we assumed that the same funding percentages currently 

required by the Small Business Act would apply to total R&D budgets. We 

also assumed that the current spending thresholds that require agency 

participation in the SBIR and STTR programs— $100 million and $1 

billion in extramural funding respectively—would instead apply to total 

R&D funding. In other words, an agency with total annual R&D funding of 

$100 million would be required to participate in the SBIR program, while 

an agency with total annual R&D funding of $1 billion would be required 

to participate in both the SBIR and STTR programs. We compared the 

spending requirements under this first scenario with the spending 

requirements under the current law to determine the potential effects of 

changing the methodology to calculate the spending requirements for 

fiscal years 2006 to 2011. We also developed two additional funding 

scenarios. We compared the potential spending requirements of these 

scenarios with the spending requirements under the current law for fiscal 

years 2006 to 2011.

10Office of Management and Budget, Analytical Perspectives, Budget of the U.S. 

Government (Washington, D.C.: FY 2008-2013). Because we could not estimate the total 

R&D budget of each agency and agencies did not include this amount in their annual 

reports, we relied on the amount of budget authority reported in the Analytical 

Perspectives volume for calculation of the required expenditures. 
 

Page 5 GAO-13-421 Small Business Research Programs

To determine the cost to participating agencies for SBIR and STTR 

program administration and how agency funds were used, we collected 

existing administrative cost data directly from agencies and interviewed 

program and financial officials at each agency to (1) learn the scope of 

existing data available on administrative costs, (2) identify amounts and 

categories of administrative costs, and (3) request existing annual cost 

data from them. We determined that these data were too incomplete and 

from such varied sources that an assessment of the available data’s 

reliability was not possible. Thus, we could not use the data in our report. 

In addition, we gathered information on the agencies’ implementation of 

the pilot program that allows a portion of SBIR program funds to be used 

for specific administrative costs.

We conducted this performance audit from April 2012 to August 2013 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

SBIR has four overarching purposes: to (1) use small businesses to meet 

federal R&D needs,11 (2) stimulate technological innovation, (3) increase 

commercialization of innovations derived from federal R&D efforts,12

 

11According to SBA, an eligible small business in the SBIR or STTR program (1) is 

organized for profit, with a place of business located in the United States; (2) is at least 51 

percent owned and controlled by one or more individuals who are citizens of, or 

permanent resident aliens in, the United States; (3) is at least 51 percent owned and 

controlled by another for-profit business concern that is at least 51 percent owned and 

controlled by one or more individuals who are citizens of, or permanent resident aliens in, 

the United States; and (4) has no more than 500 employees, including affiliates. 

and 

(4) encourage participation in technological innovation by small 

businesses owned by women and disadvantaged individuals. The SBIR 

program has a three-phase structure as follows:

12For the SBIR program as implemented during the course of our review, SBA defined 

commercialization as the “process of developing marketable products or services and 

producing and delivering products or services for sale (whether by the originating party or 

by others) to government or commercial markets.” 

Background 
 

Page 6 GAO-13-421 Small Business Research Programs

• In Phase I, agencies award up to $150,000 for a period of about 6 to 9 

months to small businesses to determine the scientific and technical 

merit and feasibility of ideas that appear to have commercial potential.

• In Phase II, small businesses whose Phase I projects demonstrate 

scientific and technical merit, in addition to commercial potential, may 

compete for awards of up to $1 million to continue the R&D for an 

additional period, normally not to exceed 2 years.

• Phase III is for small businesses to pursue commercialization 

objectives resulting from the Phase I and II R&D activities, where 

appropriate. Phase III is the period in which Phase II innovation 

moves from the laboratory to the marketplace. SBIR Phase III work 

completes an effort made under prior SBIR phases, but it is funded by 

sources other than the SBIR program. To commercialize their 

products, small businesses are expected to raise additional funds 

from private investors, the capital markets, or from non-SBIR sources 

within the agency that made the initial award.

According to SBA documents, STTR’s purpose is to stimulate a 

partnership of ideas and technologies between innovative small 

businesses and research institutions through federally funded R&D.13

• Phase I aims to establish the technical merit, feasibility, and 

commercial potential of the proposed R&D efforts and to determine 

the quality of performance of the small businesses. STTR Phase I 

awards generally do not exceed $150,000 for 1 year.

The 

program provides funding for research proposals that are developed and 

executed cooperatively between small businesses and research 

institutions. Like the SBIR program, the STTR program is structured in 

three phases as follows: 

• Phase II funding is based on the results achieved in Phase I and the 

scientific and technical merit and commercial potential of the Phase II 

project proposed. STTR Phase II awards generally do not exceed $1 

million total costs for 2 years.

• Phase III is for small businesses to pursue commercialization of 

research or technology resulting from the Phase I and II R&D 

 

13Pub. L. No. 102-564, 106 Stat. 4249. Research institutions include nonprofit colleges or 

universities, domestic nonprofit research organizations, and federally funded R&D centers. 
 

Page 7 GAO-13-421 Small Business Research Programs

activities, and it completes an effort made under the prior STTR 

phases but is funded by sources other than the STTR program. 

According to SBA, Phase III work can involve commercial application 

of R&D financed by nonfederal capital, including STTR products or 

services intended for use by the federal government and continuation 

of R&D that has been competitively selected in Phases I and II, 

according to the 2012 SBA policy directive.

As noted, federal agencies with a budget of more than $100 million for 

extramural R&D are required to have an SBIR program, while federal 

agencies with extramural R&D budgets that exceed $1 billion annually are 

required to have an STTR program. Generally, the extramural R&D 

budget is defined as the sum of the total obligations for R&D minus 

amounts to be obligated for intramural R&D, that is, R&D conducted by 

employees of a federal agency in or through government-owned, 

government-operated facilities. In determining their extramural R&D 

budget, agencies have authority to exclude certain R&D programs from 

the extramural R&D base used for calculating SBIR and STTR spending 

requirements, such as facilities and equipment used for R&D and certain 

intelligence activities. For example, under the Small Business Act, DOE 

must exclude amounts obligated for its naval reactor program from its 

extramural R&D budget.14 Likewise, under the act, DOD excludes 

programs carried out by certain elements of the intelligence community.15

In addition, DOT must exclude funds obligated for the Federal Highway 

Administration State Planning and Research program from its extramural 

R&D budget.16

In fiscal year 2011, the 11 participating agencies reported spending a 

total of $2.2 billion for SBIR, and the 5 participating agencies reported 

spending a total of $251 million for STTR, with DOD spending the most 

on these programs––$1.1 billion and $121 million, respectively. DOD’s 

reported spending constituted 48.8 percent of total SBIR spending and 

48.2 percent of total STTR spending in fiscal year 2011.

According to SBA documents, the agency’s role is to serve as the 

oversight and coordinating agency for the SBIR and STTR programs and 

 

1415 U.S.C. § 638(e)(1) (2006).

1515 U.S.C. § 638(e)(2) (2006).

1623 U.S.C. § 505(b)(3) (2006).
 

Page 8 GAO-13-421 Small Business Research Programs

is to direct and assist the agencies’ implementation of the programs, 

review their progress, collect agency reports, analyze the information in 

the agencies’ methodology reports, and report annually to Congress on 

the programs. In this role, SBA issued SBIR and STTR policy directives in 

September 2002 and December 2005, respectively, and updated them in 

August 2012; these directives provide agencies with detailed guidance on 

implementation of the SBIR and STTR programs.

Data reported by the participating agencies to SBA for fiscal years 2006 

to 2011 indicate that most of the agencies have not consistently complied 

with the mandated spending requirements for SBIR and STTR. In 

calculating their spending requirements, some participating agencies 

made improper exclusions and used differing methodologies.

Our analysis of data the participating agencies reported to SBA indicates 

that, from fiscal years 2006 to 2011, most agencies did not consistently 

comply with mandated spending requirements. Specifically, 8 of the 11 

agencies did not consistently meet annual spending requirements for 

SBIR. Data from 3 of the agencies—DHS, Education, and HHS—indicate 

that they met their spending requirements for all 6 years. For STTR, 4 of 

5 agencies did not consistently meet annual spending requirements. Data 

from 1 agency—HHS—indicate that it met its STTR spending 

requirements for all 6 years. Figure 1 shows the number of years that 

each agency met its annual SBIR and STTR spending requirements, 

based on the information submitted to SBA in each agency’s annual 

Data Indicate Most 

Agencies Have Not 

Consistently 

Complied with 

Mandated 

Requirements, 

Because of Improper 

Exclusions and 

Differing 

Methodologies 

Agency Data Indicate That 

Agencies Did Not 

Consistently Comply with 

Mandated Program 

Spending Requirements
 

Page 9 GAO-13-421 Small Business Research Programs

reports.17

Figure 1: Number of Years Agencies Met Spending Requirements for the Small Business Innovation Research (SBIR) and 

Small Business Technology Transfer (STTR) Programs for Fiscal Years 2006 to 2011

See appendix I for further details on each agency’s reported 

spending on these programs.

Note: Data are from agency annual reports to SBA, except for those of DHS, DOE, and EPA; those 

agencies submitted revised data to us, which we incorporated into our analysis. Agencies for which 

STTR data are not shown did not have STTR programs, with the exception of DHS. DHS had an 

STTR program in FY 2006 and 2007. However, the agency was not required to participate, because 

its extramural R&D budget for each of those years was actually below the $1 billion threshold 

required for participation in the STTR program. The agency stated it had inadvertently used an 

incorrect extramural budget amount to determine its participation requirement.

 

17Three agencies—DHS, EPA, and DOE—told us that the information they submitted in 

their annual reports to SBA was incorrect or incomplete. The agencies provided us with 

revised information, which we incorporated into our analysis. 
 

Page 10 GAO-13-421 Small Business Research Programs

Most participating agencies that did not meet their spending requirements 

in a given year spent at least 5 percent less than the required amount. In 

commenting on this information, agency officials said that funds are 

frequently carried into the next fiscal year for SBIR and STTR purposes. 

Although the SBIR and STTR spending requirements apply for each fiscal 

year, some agency officials said they follow the practice for most R&D 

funding, which typically may be spent over a 2-year period of 

availability,18

Table 1: Performance of Agencies in Meeting Small Business Innovation Research 

(SBIR) Spending Requirements Aggregated over Fiscal Years 2006 to 2011

allowing agencies to “carry over” funding that was 

appropriated in 1 year and spend it in the next year. In addition, some 

agency officials said examining their performance over a number of years 

would provide another perspective on their spending. In response to this 

comment, we compared agencies’ aggregated spending data for the 

SBIR program with their spending requirements, as calculated by the 

agencies, over the 6-year period of our review. When we did so, we found 

that seven agencies spent more than the aggregated sum of their 

requirements for the 6 years, and four spent less. Overall, for the 6-year 

period of our review, agencies’ SBIR total spending was less than 1 

percent or $80 million under the spending requirement, as calculated by 

the agencies. See table 1 for details.

Dollars in billions

Agency 

SBIR 

amount 

spent

SBIR spending 

requirementa

Difference between 

SBIR amount spent 

and the spending 

requirement 

Percentage 

under- or 

over-spent 

DOD $6.754 $6.940 (0.186) (2.68%)

HHS 3.659 3.610 0.049 1.36%

DOE 0.865 0.824 0.041 4.98%

NSF 0.648 0.678 (0.030) (4.42%)

NASA 0.695 0.690 0.005 0.72%

DHS 0.137 0.106 0.031 29.25%

USDA 0.117 0.118 (0.001) (.85%)

Education 0.060 0.049 0.011 22.45%

DOT 0.036 0.043 (0.007) (16.28%)

 

18Exceptions to the 2-year period of availability for R&D appropriations include HHS.
 

Page 11 GAO-13-421 Small Business Research Programs

Dollars in billions

Agency 

SBIR 

amount 

spent

SBIR spending 

requirementa

Difference between 

SBIR amount spent 

and the spending 

requirement 

Percentage 

under- or 

over-spent 

Commerce 0.043 0.039 0.004 10.26%

EPA 0.029 0.026 0.003 11.54%

Total $13.043 $13.123 (0.080) (0.61%)

Source: GAO analysis of agency data reported to SBA, except for those of DHS, DOE, and EPA; those agencies submitted revised 

data to GAO, which were incorporated into its analysis.

a

As calculated by the agency.

Note: The differences in each row may be affected by rounding.

For the STTR program, we also compared agencies’ aggregated 

spending with their spending requirements over the 6-year period of our 

review and found that three of the five participating agencies spent more 

than the aggregated sum of their requirements, and two spent less. 

Overall, for the 6-year period of our review for participating agencies, 

STTR spending was within less than 1 percent, or about $12 million, of 

the spending requirement.

Table 2: Performance of Agencies in Meeting Small Business Technology Transfer 

(STTR) Spending Requirements Aggregated over Fiscal Years 2006 to 2011

Dollars in billions

Agencya

STTR 

amount 

spent

STTR 

spending 

requirementb

Difference between 

STTR amount spent 

and spending 

requirement 

Percentage 

under- or 

over-spent 

DOD $0.792 $0.833 ($0.041) (4.92%)

HHS 0.447 0.433 0.014 3.23%

DOE 0.098 0.099 (0.001) (1.01%)

NSF 0.094 0.081 0.013 16.05%

NASA 0.086 0.083 0.003 3.61%

Total $1.517 $1.529 ($0.012) (0.78%)

Sources: GAO analysis of agency data reported to SBA, along with annual report corrections that DHS, DOE, and EPA submitted to 

GAO.

a

DHS also had an STTR program in FY 2006 and 2007. However, the agency was not required to 

participate, because its extramural R&D budget for each of those years was actually below the $1 

billion threshold required for participation in the STTR program. The agency stated it had 

inadvertently used an incorrect extramural budget amount to determine its participation requirement.

b

As calculated by the agency.

Note: Calculations may be affected by rounding.
 

Page 12 GAO-13-421 Small Business Research Programs

SBIR and STTR program managers cited three reasons why spending 

the required amount in a given fiscal year could be difficult. First, delays 

in receiving final appropriations can delay agencies’ awarding of contracts 

for SBIR or STTR projects. Some program managers said that they tend 

to wait to award some grants and contracts until receiving their final 

appropriations in case the agency’s extramural R&D budget—and, 

therefore, its SBIR or STTR spending requirement—differs significantly 

from the expected amount. Because the award process can be lengthy, a 

delay can push the awards and spending into the following fiscal year. 

Over the period of our review, agencies often received final 

appropriations decisions after the beginning of the fiscal year and in some 

cases more than 6 months into the year. For example, in fiscal year 2011, 

many participating agencies operated under a continuing resolution until 

April 2011,19 when they received their final appropriation for the 

remainder of the fiscal year. DOD officials noted that carrying over funds 

enables agencies to effectively manage contracts to accommodate the 

timing of the awards and delays in funding decisions. The second reason 

cited by SBIR and STTR managers was that in a given fiscal year, 

agencies decide on a mix of Phase I and Phase II awards to meet 

program objectives, and the collective amount of these awards may not 

equal their annual spending requirement—leaving the difference between 

the awards and the spending requirement unused. NASA officials said a

third reason agencies may have difficulty spending all required funds is 

that changes in a company’s status—through a merger, for example—

could make a company that was under consideration for an award too 

large to be eligible for the program. According to these officials, such 

changes could occur too late to spend those funds in a given fiscal year.

In calculating the programs’ spending requirements, some participating 

agencies made improper exclusions from their extramural R&D budgets, 

which are the basis for calculating the requirements, and when 

appropriations were received late in the year, agencies used differing 

methodologies to calculate their spending requirements, making it difficult 

to determine whether agencies’ calculations were correct.

 

19A continuing resolution is an appropriations act for federal agencies to continue in 

operation when Congress and the President have not completed action on the regular 

appropriation acts by the beginning of the fiscal year.

Some Agency Calculations 

of Spending Requirements 

Show Improper Exclusions 

and Differing 

Methodologies 
 

Page 13 GAO-13-421 Small Business Research Programs

Some agencies have specific statutory authority to exclude certain 

subunits or programs in calculating the extramural R&D budget used for 

determining the spending requirements for SBIR and STTR programs, but 

we found that some participating agencies made exclusions that are not 

consistent with this statutory authority. For example, as discussed below, 

two agencies excluded the extramural R&D budgets of agency subunits 

because those budgets were lower than the threshold requirements for 

program participation--$100 million for SBIR and $1 billion for STTR—

even though, as defined in law, the thresholds apply to the entire 

departmental budget and not to agency subunits: 

• DOD reported excluding the Research, Development, Testing, and 

Evaluation budget of the United States Special Operations Command

subunit from its extramural R&D budget because the budget is less 

than the $1 billion required for participating in the STTR program.

• HHS reported excluding the extramural R&D budgets of the Centers 

for Disease Control and Prevention and the Food and Drug 

Administration because these subunit budgets are less than the $1 

billion required for participating in the STTR program.

In another example, a third agency, DOT reported excluding the Federal 

Aviation Administration’s extramural R&D budget, which is well in excess 

of $100 million annually, from the SBIR program budget calculation. We 

asked DOT and FAA to provide the legal authority for this exclusion, but 

they did not supply this information.

Improperly excluding subunits reduced calculations of three agencies’ 

respective extramural R&D and, in turn, the agencies’ spending 

requirements for SBIR and STTR. Over fiscal years 2006 to 2011, these 

improper exclusions resulted in a $7.7 million reduction to DOD’s STTR 

spending requirement, a $34.7 million reduction to DOT’s SBIR 

requirement, and HHS’ exclusions resulted in a $6.1 million reduction to 

its STTR spending requirement. Officials at DOD said they changed the 

agency’s policy on exclusions as of fiscal year 2013 and that the new 

policy, which will not allow these improper exclusions, is currently being 

implemented. DOT provided no further information on its exclusion. HHS 

met its overall agency spending requirement even with the improper 

exclusions, according to the data in HHS’ annual reports to SBA.

In addition to identifying improper exclusions, we found that, when 

appropriations were received late in the year, agencies used differing 

methodologies to calculate their spending requirements, making it difficult 
 

Page 14 GAO-13-421 Small Business Research Programs

to determine whether agencies’ calculations were correct. For example, 

some agency program managers told us that, when appropriations were 

received late in the year, they used their prior year actual spending to 

calculate their current year spending requirement, while others calculated 

their current year spending requirement using some other methodology. 

Specifically, program managers at the National Institute of Standards and

Technology (NIST)—a subunit of Commerce—stated that program 

managers at NIST used the past year’s actual SBIR spending to calculate 

the current year’s requirement. In contrast, NASA calculated its SBIR 

spending requirement by determining what percentage its extramural 

R&D spending comprised of its total R&D spending in the prior year. 

NASA then applied this percentage to the current year’s total R&D budget 

to calculate the current year’s extramural budget, which it then used as 

the basis for calculating the SBIR and STTR spending requirements.

Although SBA provided guidance in policy directives for participating 

agencies on calculating their spending requirements, neither SBA’s prior 

nor its current policy directives provide guidance to agencies on how to 

calculate such spending requirements when agency appropriations are 

delayed. Without such guidance, agencies will likely continue to calculate 

spending requirements in differing ways.

Agencies participating in the SBIR and STTR programs have not 

consistently complied with Small Business Act requirements for annually 

reporting a description of their methodologies for calculating their 

extramural R&D budgets to SBA. In addition, SBA has not consistently 

complied with the act’s requirements for annually reporting to Congress, 

including reporting on SBA’s analysis of the agencies’ methodologies for 

calculating their extramural R&D budgets.

With the exception of NASA in certain years, agencies did not submit their 

methodology reports to SBA within the time frame required by the Small 

Business Act for fiscal years 2006 to 2011 for the SBIR and STTR

programs. The act requires that agencies report to SBA their 

methodologies for calculating their extramural budgets within 4 months 

after the date of enactment of their respective appropriations acts.20

 

2015 U.S.C. 638(i)(2)(A). 

However, most participating agencies documented their methodologies 

Agencies and SBA 

Have Not Consistently 

Complied with 

Certain Reporting 

Requirements 

Agencies’ Reporting of 

Methodologies Did Not 

Consistently Comply with 

Requirements
 

Page 15 GAO-13-421 Small Business Research Programs

for calculating their extramural R&D budgets for these fiscal years and 

submitted them to SBA after the close of the fiscal year with their annual 

reports, but three agencies—USDA, Education, and DOT—did not 

provide a methodology report for 1 fiscal year during this period. USDA 

did not submit a report on its fiscal year 2007 methodology because 

agency officials said it was identical to prior years. Officials from 

Education and DOT said they typically submitted their methodology 

reports with their annual reports. However, they told us that for fiscal year 

2011 they did not submit their methodology reports to SBA on time 

because that was the first year that agencies were required to submit 

their annual reports to SBA’s automated system and there was not a 

place in SBA’s system to submit methodology reports. SBA officials said 

that they nonetheless expected agencies to submit their methodology 

reports and that there are several methods to transmit this information, 

such as by memorandum or e-mail. Education officials later told us they 

submitted their 2011 methodology report to SBA in January 2013.

SBA officials said that they have not held the agencies to the act’s 

deadline for submitting methodology reports, in part because continuing 

resolutions enacting final appropriations have sometimes not been 

passed until the middle of the fiscal year. This timing for appropriations 

has pushed the required reporting date of the methodology report—due 4 

months after appropriations are set—until late in the fiscal year. SBA 

officials said this has made it more convenient for participating agencies 

to submit the methodology report with the annual report. Further, SBA 

officials said the agency uses the methodology reports for their annual 

reports to Congress. By not having the methodology reports earlier in the 

year as specified by law, however, SBA does not have an opportunity to 

promptly analyze these methodologies and provide the agencies with 

timely feedback to assist agencies in accurately calculating their spending 

requirements. SBA officials said they have provided feedback orally and 

through e-mails to the participating agencies about their methodology 

reports, but many agency program managers said that SBA has provided 

little feedback. By not providing such feedback, SBA is forgoing the 

opportunity to assist agencies in correctly calculating their program 

spending requirements and helping to ensure that they meet mandated 

requirements.

More significantly, the majority of the agencies did not include information 

consistent with a provision in SBA’s SBIR and STTR policy directives that 
 

Page 16 GAO-13-421 Small Business Research Programs

specifies the act’s requirement for a methodology report from each 

agency.21

• two of the participating agencies—EPA and HHS—complied fully with 

the requirements because they included in their methodology reports 

an itemization of the programs excluded from the calculation of their 

extramural R&D budget and an explanation of why the programs were 

excluded for all 6 fiscal years in our review; and

Specifically, the SBA policy directives state that the 

methodology report must include an itemization of each R&D program 

excluded from the calculation of the agency’s extramural budget and a 

brief explanation of why it is excluded. In our review, we found that

• six agencies—DHS, DOD, DOE, DOT, NASA and NSF—did not fully 

meet these requirements for the 6 fiscal years in our review because 

their methodology reports either identified some excluded programs 

but not others that we identified or the reports omitted explanations for 

exclusions.22

As a result, agencies submitted different information, including different 

levels of detail on their methodologies. For example, some agencies 

provided itemization of each R&D program excluded, including dollar 

amounts and statutory authority, as part of the calculation of the agency’s 

extramural budget and a brief explanation of why it is excluded, while 

other agencies only provided a brief explanation. SBA officials told us that 

most participating agencies’ methodology reports have changed little from 

year to year, so SBA does not raise questions about details of their 

methodologies. In the absence of guidance from SBA on the format in 

which the methodology reports are to be presented, DOD developed a 

methodology template that guides the calculation of DOD’s extramural 

R&D budget and in turn the programs’ spending requirements, including 

the identification of any R&D programs excluded from the basis for 

calculating their spending requirements and a brief explanation of why 

they are excluded. Without guidance on the format of methodology 

 

21The 2002 SBIR and the 2005 STTR policy directives were in effect during the period of 

our review.

22Three other agencies—Commerce, Education, and USDA—did not report excluding any 

programs from the calculation of extramural R&D for any of the fiscal years. Because 

existing SBA guidance in policy directives does not require agencies to affirm that no 

exclusions were made, we asked the three agencies if they had in fact made exclusions 

but just not reported them. In each case, the agencies confirmed that they had, in fact, not 

made exclusions.
 

Page 17 GAO-13-421 Small Business Research Programs

reports, participating agencies are likely to continue to provide SBA with 

broad, incomplete, or inconsistent information about their methodologies 

and spending requirements. Furthermore, without having more consistent 

information from agencies, it is difficult for SBA to comprehensively 

analyze the methodologies and determine whether agencies are 

accurately calculating their spending requirements.

In addition, for the agency annual report requirement, SBA has provided a 

template that asks agencies for the extramural R&D budget base used to 

calculate the SBIR or STTR spending requirements, but it does not ask 

for the specific calculations used to derive that budget base. Unlike the 

requirement set by law and SBA policy directives for methodology reports 

to include a description of their methodologies for calculating extramural 

R&D budgets, information on actual calculations, such as identifying 

exclusions, is not required for agency annual reports to SBA. However, 

because annual reports show the results of the previously described 

methodology including such information in the annual reports is important. 

By not requesting that agencies include calculations used to derive the 

budget base in its template, SBA has been receiving incomplete 

information from the participating agencies, which limits the usefulness of 

data the agency reports to Congress. SBA officials told us that 

participating agencies’ calculations of spending requirements have 

changed little from year to year, and so SBA does not raise questions 

about the calculations. SBA likewise does not request that agencies 

include information in their annual reports that would enable SBA to 

conduct better oversight, including information on (1) whether agencies 

met the mandated spending requirements, (2) the reasons for any 

noncompliance with these requirements, and (3) the agencies’ plans for 

meeting any noncompliance in future years. By including this information, 

SBA could more fully oversee the programs and provide more complete 

information to Congress.
 

Page 18 GAO-13-421 Small Business Research Programs

SBA has not consistently complied with the requirement for reporting its 

analysis of the agencies’ methodologies in its annual report to 

Congress,23 as required by the Small Business Act.24

Moreover, SBA officials said they delayed submitting their annual reports 

to Congress for fiscal years 2009, 2010, and 2011 to reconcile significant 

inconsistencies the agency found between spending data submitted by 

participating agencies in their annual reports to SBA and data routinely 

collected in SBA’s automated system from agencies and awardees on 

SBIR and STTR awards made during the fiscal year. In commenting on a 

draft of this report in August 2013, SBA program officials said that the 

three reports had been consolidated into one report that was being 

reviewed by the Office of Management and Budget. The agency plans to 

submit the reports to Congress in 2013, making the data available to 

Congress on the programs 2 to 4 years after the end of the fiscal year.

Over the 6 years 

covered in our review, SBA reported to Congress for 3 of those, fiscal 

years 2006, 2007, and 2008. Furthermore, these reports contained limited 

analyses of the agencies’ methodologies, and some of the analyses were 

inaccurate. For example, SBA’s analysis was limited to a table attached 

to the annual report to Congress that often did not include information on 

particular agencies; SBA provided no other documentation showing the 

results of its analysis of the agency methodology reports. For example, in 

its fiscal year 2006 annual report, SBA concluded that all of the 

participating agencies complied with program requirements in calculating 

their extramural R&D budgets but did not present the basis for its 

conclusion. As noted earlier, our review showed that some participating 

agencies improperly excluded some extramural programs from their 

funding base calculation and did not consistently comply with SBA’s 

instructions in its policy directive to itemize the exclusions in their 

calculation of the R&D extramural budget for either the SBIR or STTR 

program. Without more comprehensive analysis and accurate information 

on participating agencies in SBA’s annual report, Congress does not have 

information on the extent to which agencies are reporting what is required 

by law or if they are under spending by, for example, taking improper 

exclusions.

 

23The act directs that the SBA Administrator report not less than annually to the 

Committee on Small Business and Entrepreneurship of the Senate and to the Committee 

on Science and Technology and the Committee on Small Business of the House of 

Representatives.

2415 U.S.C. § 638(i)(2)(B). 

SBA Annual Reports to 

Congressional Committees 

Are Often Late and 

Incomplete 
 

Page 19 GAO-13-421 Small Business Research Programs

Changing the methodology to calculate the SBIR and STTR spending 

requirements based on each agency’s total R&D budget instead of each 

agency’s extramural R&D budget would increase the amount of each

agency’s spending requirement for the programs, some much more than 

others, depending on the assumptions about how the funding base 

change is implemented. Also, it would increase the number of agencies 

that would be required to participate in the programs. Some agencies 

reported that such a change could have effects on their R&D programs 

and may create challenges.

If the SBIR and STTR spending requirements under current law were 

applied to an agency’s total R&D budget rather than to the extramural 

R&D budget, the spending requirements for each agency would increase 

because their extramural R&D budget is a part of, and therefore smaller, 

than their total R&D budget.25

Table 3: Comparison of Fiscal Year 2011 Small Business Innovation Research (SBIR) and Small Business Technology 

Transfer (STTR) Programs’ Spending Requirements under the Current Law and If Based on the Participating Agencies’ Total 

R&D Budget

Table 3 shows a comparison of the 

agencies’ spending requirements for the SBIR and STTR programs in 

fiscal year 2011 under the current law, based on an agency’s extramural 

R&D budget, and this alternative methodology.

Dollars in millions

Agency

Agency’s 

extramural 

R&D 

budgeta

Agency’s 

total R&D 

budgetb

SBIR 

spending 

requirement 

under current 

lawc

SBIR spending 

requirement 

based on 2.5 

percent of the 

total R&D budget

Percentage 

difference in 

SBIR from 

current law

STTR 

spending 

requirement 

under current 

lawd

STTR spending 

requirement based 

on 0.3 percent of 

the total R&D 

budget

Percentage 

difference in 

STTR from 

current law

USDA $768 $2,284 $19 $57 200 e e e

Commerce 239 1,021 6 26 333 e e e

DOD 41,678 77,410 1,042 1,935 86 $125 $232 86

Education 346 362 8.6 9.1 6 e e e

DOE 5,857 9,915 146 248 70 18 30 67

HHS 24,714 31,099 618 777 26 74 93 26

DHS 468 512 12 13 8 e e e

 

25The SBIR and STTR spending requirements were 2.5 percent and 0.3 percent, 

respectively, of extramural R&D budgets for fiscal years 2006 through 2011.

Basing Spending 

Requirements on 

Agencies’ Total R&D 

Budgets Could 

Increase Spending 

and Program 

Participation 

Changing the Base for 

SBIR and STTR Budgets to 

Total R&D Would Increase 

Agency Spending 

Requirements
 

Page 20 GAO-13-421 Small Business Research Programs

Dollars in millions

Agency

Agency’s 

extramural 

R&D 

budgeta

Agency’s 

total R&D 

budgetb

SBIR 

spending 

requirement 

under current 

lawc

SBIR spending 

requirement 

based on 2.5 

percent of the 

total R&D budget

Percentage 

difference in 

SBIR from 

current law

STTR 

spending 

requirement 

under current 

lawd

STTR spending 

requirement based 

on 0.3 percent of 

the total R&D 

budget

Percentage 

difference in 

STTR from 

current law

DOT 384 929 10 23 130 e e e

EPA 182 584 5 15 200 e e e

NASA 4,998 8,839 125 221 77 15 27 80

NSF 4,956 5,091 124 127 2 15 15 0 

Total $84,590 $138,046 $2,116 $3,451 63 $247 $397 61

Sources: GAO analysis of agencies’ data.

a

Each agency’s extramural R&D budget as reported by the agencies in their annual reports to SBA.

b

Each agency’s total R&D budget authority is from the Analytical Perspectives volume of the 

President’s Budget. The category of “Facilities and Equipment” is not included in the total shown in 

this table.

c

Each agency’s SBIR spending requirement under the current law in fiscal year 2011 is calculated as 

2.5 percent of its extramural R&D budget.

d

Each agency’s STTR spending requirement under the current law in fiscal year 2011 is calculated as 

0.3 percent of its extramural R&D budget.

e

Agency did not participate in STTR.

Note: Calculations may be affected by rounding.

As shown in table 3, some agencies’ spending requirements would 

increase more than others. This is due to differences in the relative 

proportions of the extramural and intramural R&D budgets among 

agencies. Examples are as follows:

• NSF used almost its entire R&D budget for extramural R&D in fiscal 

year 2011 and was required to spend about $124 million on its SBIR 

program in that year. Its spending requirement would have increased 

slightly to $127 million—about a 3 percent increase—if the spending 

requirement were based on the total R&D budget instead of the 

extramural R&D budget. For NSF’s STTR program, the spending 

requirement in fiscal year 2011 would have increased about 3 

percent—the same percentage increase as for SBIR.

• Commerce used a relatively small percentage of its total R&D 

budget—about 25 percent—for extramural R&D in fiscal year 2011, 

and its spending requirement for SBIR would have more than 

quadrupled from about $6 million to $26 million—333 percent—in 

fiscal year 2011 if the calculation methodology changed. While 

Commerce does not participate in the STTR program currently, it 

would have to participate in the STTR program if the calculation 
 

Page 21 GAO-13-421 Small Business Research Programs

methodology changed. Its spending requirement would have been $3 

million rather than zero.

To put these figures in perspective, if the funding percentage in law were 

applied to the total R&D budget instead of the extramural budget, NSF’s 

spending on SBIR in 2011 would have increased to about 2.6 percent of 

its extramural R&D budget, while Commerce’s spending would have 

increased to about 10.7 percent of its extramural R&D budget. For the 

STTR program, if the funding percentage in the law were applied to the 

total R&D budget instead of the extramural budget, NSF’s spending on 

STTR would have increased to about 2.7 percent of the extramural R&D 

budget, and Commerce’s spending would have increased from zero.

In addition to the changes in the dollar amount of funds available for 

STTR and SBIR spending requirements, agencies said that changing the 

base for calculation of budgets for these programs would affect agency 

operations, depending on assumptions about how the funding base 

change is implemented. For example, changing the base would increase 

SBIR and STTR budgets and could result in reductions in certain types of 

intramural R&D with corresponding reductions in full-time equivalent 

staffing of these programs. In addition, some agency officials said there 

were potential changes in the content of the agency’s extramural R&D 

effort because of changes in the types of businesses that receive grants 

and contracts.

In addition to applying the same percentages as used under current law 

to the total R&D budget, we analyzed the potential changes to spending 

requirements using two other alternative scenarios that apply different 

percentages to the total R&D budget. In these scenarios, some agencies 

would have experienced an increase in spending requirements, while 

others would have experienced a decrease. Appendix II contains a 

discussion of the alternate scenarios and the results of our analysis.

Changing the calculation methodology to the total R&D budget would also 

increase the number of agencies that would be required to participate in 

the SBIR and STTR programs, assuming the same dollar thresholds for 

participating in the programs were applied to the total R&D budget rather 

than only the extramural R&D budget. For example, our analysis of the 

total R&D budget for all federal agencies for fiscal year 2011 indicates 

that

Changing the Calculation 

Methodology Would 

Increase the Number of 

Agencies Required to 

Participate
 

Page 22 GAO-13-421 Small Business Research Programs

• For SBIR, two additional agencies—the Departments of Veterans 

Affairs (VA) and the Interior—would have been required to participate 

in fiscal year 2011 if total R&D budgets had been the criteria. These 

agencies reported total R&D budgets to SBA in excess of $100 

million, which is the threshold for participation in the SBIR program. 

Adding these two agencies to participating SBIR agencies in fiscal 

year 2011 with the total R&D budget as the base, would have 

increased total federal SBIR spending by $48 million.

• For STTR, three additional agencies—Commerce, USDA, and VA—

would also have been required to participate in the STTR program for 

fiscal year 2011 if total R&D budgets had been the criteria for meeting 

the threshold. These agencies reported total R&D budgets in excess 

of $1 billion, which is the threshold for participation in the STTR 

program. Adding these three agencies to STTR in fiscal year 2011 

with the total R&D budget as the base would have increased total 

STTR spending by $13 million.26

Table 4 shows these agencies’ R&D budgets and what their SBIR and 

STTR spending requirements for fiscal year 2011 would have been if the 

spending methodology was changed to the total R&D budget.

 

26In other fiscal years that we reviewed, these agencies may not have been required to 

participate in the STTR program as their total R&D spending fell below the threshold 

requirement.
 

Page 23 GAO-13-421 Small Business Research Programs

Table 4: Additional Agencies That Would Participate in the Small Business 

Innovation Research (SBIR) and Small Business Technology Transfer (STTR) 

Programs if the 2011 Base Were Revised to Total R&D Budget Authority

Dollars in millions

Agency

Agency’s total 

R&D budget 

authoritya

SBIR spending 

requirement based 

on 2.5 percent of the 

total R&D budget

STTR spending 

requirement based 

on 0.3 percent of the 

total R&D budget

Department of the 

Interior $755 $19 c 

Department of 

Veterans Affairs $1,160 $29 $3

Department of 

Agriculture $2,284 b $7

Department of 

Commerce $1,021 b $3

Source: GAO analysis of fiscal 2011 agency data.

a

Each agency’s total R&D budget authority is from the Analytical Perspectives volume of the 

President’s Budget.

b

Agency currently participates in the SBIR program.

c

The agency’s total R&D budget does not meet the threshold for the program.

Note: Calculations may be affected by rounding.

The participating agencies’ cost of administering the SBIR and STTR 

programs cannot be determined because the agencies neither collect that 

information nor have the systems to do so. Neither the authorizing 

legislation for the programs nor SBA guidance directs agencies to track 

and estimate all administrative costs, and neither the law nor SBA 

guidance defines these administrative costs. Estimates agencies provided 

indicated that the greatest amounts of administrative costs in fiscal year 

2011 were for salaries and expenses, contract processing, outreach 

programs, technical assistance programs, support contracts, and other 

purposes. With the implementation in 2013 of a pilot program allowing 

agencies under certain conditions to use up to 3 percent of SBIR program 

funds for certain administrative costs, SBA expects to require agencies in 

the pilot program to track and report the spending of that 3 percent but 

not all of their administrative costs.

Agencies’ Cost for the 

Administration of the 

Programs Cannot 

Currently Be 

Determined Because 

the Agencies Do Not 

Identify or Track All 

Costs 
 

Page 24 GAO-13-421 Small Business Research Programs

The participating agencies have not comprehensively identified or tracked 

the cost of administering the SBIR and STTR programs for several 

reasons. Agency officials said that the costs cannot be determined 

because the agencies do not have the systems for collecting the data.

Neither the authorizing legislation for the programs nor SBA guidance 

directs agencies to track and estimate administrative costs, and neither 

the law nor SBA guidance defines these administrative costs. We found 

that the amount of funds that participating agencies spent administering 

the SBIR and STTR programs—and the way the funds were used—

cannot currently be estimated because the agencies have not identified or 

tracked many categories of program administrative costs. Agency officials 

said an important reason that administrative costs for the SBIR and STTR 

programs are not comprehensively identified or tracked is that using SBIR 

or STTR budgets to fund administrative costs has been generally 

prohibited. The Small Business Act generally prohibits agencies, except 

for DOD, from using any of their SBIR or STTR budgets to fund 

administrative costs of the programs, including the cost of salaries.27

In addition, agency officials told us that the SBIR and STTR programs cut 

across many agency programs and disciplines and that the staff 

supporting the programs may work on a full-time or part-time basis, 

making identification and estimation of costs more difficult. For example, 

DOE reported the administrative costs of the SBIR and STTR program 

office only, but pointed out that the programs involved the part-time efforts 

of 70 to 100 additional people throughout DOE, including technical 

program managers, grants specialists and contracting officers, whose 

costs were not estimated.

Agencies reported that administrative costs of the programs were paid out 

of budget accounts other than the SBIR and STTR accounts.

Similarly, HHS officials said it would be an exceptionally complex 

calculation to determine how much is currently spent on the 

administrative costs of the SBIR or STTR program because a large 

number of HHS staff work a fraction of their time on these programs. 

Officials in HHS’ National Institutes of Health (NIH), which accounts for 

the majority of HHS’ SBIR and STTR R&D programs, said there were a 

 

27As previously noted, beginning in fiscal year 2013, under a pilot program a portion of 

SBIR program funds may become available for administrative costs, such as the provision 

of outreach and technical assistance, and contract processing, and other specified 

purposes. 

Agencies Have Not 

Comprehensively 

Identified or Tracked 

Administrative Costs for 

Several Reasons
 

Page 25 GAO-13-421 Small Business Research Programs

small number of full-time staff on these programs; rather, NIH officials 

said that most staff managing the programs do so as a collateral part of 

their duties and are not required to track the portion of their time spent on 

the programs. NASA reported that its budget estimate included a 

separate line for SBIR and STTR program management that covers 

personnel costs, travel, and procurement costs. NASA officials noted, 

however, that other costs to operate the programs are not included in this 

budget estimate, including the cost of NASA technical experts to review 

proposals and the cost of technical and contracting representatives 

interacting with small businesses. NASA officials did provide a rough 

estimate for the number of hours and full time equivalent staff spent by 

NASA technical reviewers and contracting personnel in a typical year as 

25 to 38 full-time equivalent staff. The officials noted that the estimate 

does not include hours spent by others involved: mission directorate 

representatives, center chief technologists, contracting officers, support 

contractors, procurement support, and legal support. They also said that 

they did not have estimates for such categories as support contracts, 

outreach, and technical assistance.

In response to our request for information on administrative costs for 

fiscal year 2011, 9 of the 11 participating agencies provided us with 

estimates of a portion of their costs to administer the SBIR and STTR 

programs in fiscal year 2011. Of the administrative costs estimated by 

these 9 agencies, the greatest amounts were for salaries and expenses, 

contract processing costs, outreach programs, technical assistance 

programs, and support contracts, and the “other” category.28 In some 

cases, officials for some agencies identified having costs in these 

categories or several others but provided no estimates of the amounts. 

The agency with the most administrative costs estimated in the most 

categories for 2011 was DOD, which provided estimates in 10 cost 

categories.29

 

28The “other” category was used to collect costs that did not fit into the categories 

available, or costs that were not categorized. 

Of the 11 participating agencies, Commerce and HHS did 

29The 10 categories of costs that DOD and its subunits were asked to estimate were: 

salaries and expenses, travel, contract processing costs, personnel and assistance for 

application reviews, outreach and technical assistance, commercialization and outreach 

activities, oversight and congressional reporting, oversight and quality control measures, 

support contracts and other.

Most Estimated SBIR and 

STTR Administrative Costs 

Were in Salaries and 

Expenses, Contract 

Processing, Outreach and 

Technical Assistance, 

Support Contracts, and 

Other Categories
 

Page 26 GAO-13-421 Small Business Research Programs

not provide estimated administrative costs or identify having 

administrative costs in any category.

In response to our data requests and questions regarding fiscal year 

2011, the 9 agencies provided some estimates, identified unestimated 

costs, or had no response in many of the costs categories for which we 

requested data. An overview of the information we obtained is contained 

in appendix III.

As noted earlier, the National Defense Authorization Act for Fiscal Year 

2012 created a pilot program beginning in fiscal year 2013 that would 

allow up to 3 percent of SBIR program funds to be used for administrative 

costs, the provision of outreach and technical assistance and contract 

processing, and other specified purposes.30

According to SBA’s policy directive, funding under this pilot is not 

intended to and must not replace current agency administrative funding in 

support of SBIR activities. Rather, funding under this pilot program is 

intended to support additional initiatives. SBA issued its guidance for the 

pilot program as part of its revised policy directive of August 2012 and 

requires agencies to submit annual work plans to SBA for approval on 

spending priorities, amounts, milestones, expected results, and 

performance measures before agencies can begin the pilot.

Agencies are otherwise 

generally not permitted to spend SBIR or STTR program funds on 

administrative costs.

31

 

30An agency was not to use funds for the specified purposes until after the effective date 

of SBA-established performance criteria to measure any benefits of using funds for these 

purposes, which SBA first provided to participating agencies on July 30, 2012. STTR 

program funds were not made available by the pilot program provision. 

The SBA 

guidance also directs agencies to report to them on the use of the funds 

allowed to be spent on administrative costs under the pilot program 

authority in their annual reports. However, agencies will not identify or 

track all of their administrative costs so SBA will not be able to report to 

Congress on total administrative costs. Of the 11 agencies participating in 

31Under Sec. 5141(a) of Pub. L. No. 112-81, the 2011 reauthorization act establishing the 

pilot program, the SBA Administrator was to issue rules to carry out the pilot program 

within 180 days of enactment of the law. The directive containing the guidance was 

published in the Federal Register on August 6, 2012—219 days after enactment of the law 

establishing the pilot program.

Participation in the 

Administrative Costs Pilot 

Program Will Require 

Agencies to Track Certain, 

but Not All Costs
 

Page 27 GAO-13-421 Small Business Research Programs

the SBIR program, 10 have submitted plans for the pilot program to SBA. 

SBA officials told us that, as of August 2013, all 10 of the agencies’ pilot 

plans had been approved for implementation in the current fiscal year.

To help small businesses develop and commercialize innovative 

technologies, federal agencies have awarded billions of dollars to such 

businesses under the SBIR and STTR programs, which SBA oversees. In 

its role overseeing the programs, SBA has issued policy directives that 

provide agencies with guidance on the implementation of the programs. 

Agencies participating in the programs are required by law to spend a 

specific minimum portion of their extramural R&D budgets on these 

awards and to report certain information related to their spending to SBA. 

In turn, SBA is to review this information and report on it annually to 

Congress. However, participating agencies’ compliance with the 

programs’ spending requirements is unclear because some agencies 

improperly calculated their spending requirements and—in the absence of 

specific guidance from SBA when their appropriations were delayed—

agencies used differing methodologies for calculating these requirements. 

Without guidance from SBA, agencies will likely continue to calculate 

spending requirements in differing ways, which will continue to raise 

questions about their compliance. In addition, most agencies’ reports to 

SBA about their methodologies for calculating their spending 

requirements did not contain key details, such as the identification of any 

R&D programs excluded from the basis for calculating their spending 

requirements and a brief explanation of why they are excluded, which is 

required both by law and SBA policy directives. Agencies also submitted 

differing information in these reports because SBA’s policy directives do 

not specify the format for the reports. Without guidance on the format of 

methodology reports, participating agencies are likely to continue to 

provide SBA with broad, incomplete, or inconsistent information about 

their methodologies and spending requirements. Furthermore, without 

more complete and consistent information from agencies, it is difficult for 

SBA to comprehensively analyze the methodologies and whether 

agencies are accurately calculating their spending requirements. 

Moreover, according to agency officials, SBA provided little timely 

feedback about the agencies’ methodology reports. By not providing such 

feedback, SBA is forgoing the opportunity to assist agencies in correctly 

calculating their program spending requirements and helping to ensure 

that they meet mandated requirements.

In addition, for the participating agencies’ annual report requirement, SBA 

has provided a template requesting the extramural R&D budget base that 

Conclusions 
 

Page 28 GAO-13-421 Small Business Research Programs

agencies used to calculate the programs’ spending requirements, but the 

template does not request the specific calculations agencies used to 

derive those requirements. By not requesting such calculations, SBA has 

been receiving inconsistent and incomplete information from the 

participating agencies, which limits the usefulness of data it reports to 

Congress. SBA likewise does not request that agencies include 

information in their annual reports that would enable better oversight, 

including information on (1) whether agencies met the mandated 

spending requirements, (2) the reasons for any noncompliance with these 

requirements, and (3) the agencies’ plans for meeting any noncompliance 

in future years. Finally, SBA’s annual reports to Congress have been 

years late or contained little analysis of the methodology reports agencies 

submitted to describe how they calculated their spending requirements. 

Without more rigorous oversight by SBA and more timely and detailed 

reporting on the part of both SBA and participating agencies, it will be 

difficult for SBA to ensure that intended benefits of these programs are 

being attained and that Congress receives critical information to oversee 

these programs.

To ensure that participating agencies and SBA comply with spending and 

reporting requirements for the SBIR and STTR programs, we recommend 

the SBA Administrator take the following four actions:

• Provide additional guidance on how agencies should calculate 

spending requirements when agency appropriations are received late 

in the fiscal year and the format agencies are to include in their 

methodology reports.

• Provide timely annual feedback to each agency following submission 

of its methodology report on whether its method for calculating the 

extramural R&D budget used as the basis for the SBIR and STTR 

spending requirements complies with program requirements including 

an itemization of and an explanation for all exclusions from the basis 

for the calculations.

• Direct participating agencies to include in their annual reports the 

calculation of the final extramural R&D budget used as the basis for 

their SBIR and STTR spending requirements and, if they did not meet 

the spending requirements, the reasons why not and how they plan to 

meet the spending requirements in the future.

Recommendations for 

Executive Action
 

Page 29 GAO-13-421 Small Business Research Programs

• Provide Congress with a timely annual report that includes a 

comprehensive analysis of the methodology each agency used for 

calculating the SBIR and STTR spending requirements, providing a 

clear basis for SBA’s conclusions about whether these calculations 

meet program requirements. 

We provided copies of our draft report to the Secretaries of USDA, 

Commerce, DOD, Education, DOE, HHS, DHS, and DOT; the 

Administrators of SBA, EPA, and NASA; and the Director of NSF for 

review and comment. In response, six of the agencies—USDA, 

Education, DOE, EPA, NASA, and NSF—stated by e-mail that they had 

no technical or written comments. Five other agencies—Commerce, 

DHS, DOD, DOT, and HHS—provided technical comments by e-mail, 

which we incorporated into the draft report as appropriate. 

SBA provided technical comments on the draft report and officials of 

SBA’s Office of Technology said by e-mail through the Office of 

Congressional and Legislative Affairs that they agree with the findings of 

the report and will work to implement the recommendations. Specifically, 

in response to our recommendation to provide additional guidance on 

how agencies should calculate spending requirements, SBA said it plans 

a training session for all SBIR and STTR agencies to provide guidance 

and uniformity in the calculation of extramural budgets. In response to our 

finding that SBA is not receiving timely methodology reports from the 

agencies in order to provide feedback, SBA said it has strongly 

encouraged the agencies to submit their methodologies to SBA in a 

timely manner. We incorporated SBA’s technical comments into the 

report as appropriate.

We are sending copies of this report to the Secretaries of Agriculture, 

Commerce, Defense, Education, Energy, Health and Human Services, 

Homeland Security, and Transportation; the Administrators of the Small 

Business Administration, the Environmental Protection Agency, and the 

National Aeronautics and Space Administration; the Director of the 

National Science Foundation; the appropriate congressional committees; 

and other interested parties. In addition, this report is available at no 

charge on the GAO website at http://www.gao.gov. 

Agency Comments
 

Page 30 GAO-13-421 Small Business Research Programs

If you or your staff members have any questions about this report, please 

contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. Key contributors to this report are listed in 

appendix IV.

Frank Rusco

Director, Natural Resources and Environment
 

Page 31 GAO-13-421 Small Business Research Programs

List of Committees

The Honorable Mary L. Landrieu

Chairman

The Honorable James E. Risch

Ranking Member

Committee on Small Business & Entrepreneurship

United States Senate

The Honorable Lamar Smith

Chairman

The Honorable Eddie Bernice Johnson

Ranking Member

Committee on Science, Space and Technology

House of Representatives 

The Honorable Sam Graves

Chairman

The Honorable Nydia M. Velázquez

Ranking Member

Committee on Small Business

House of Representatives
Appendix I: Comparison of Participating 

Agencies’ Reported Requirements and 

Spending for the SBIR and STTR Programs, 

Fiscal Years 2006 to 2011

Page 32 GAO-13-421 Small Business Research Programs

Figures 2 through 12 compare reported spending requirements of the 11 

agencies participating in the Small Business Innovation Research (SBIR) 

program with their reported spending over fiscal years 2006 to 2011.

Figures 13 through 17 compare reported spending requirements of the 5 

agencies participating in the Small Business Technology Transfer (STTR) 

program with their reported spending over fiscal years 2006 to 2011.1

 

1

We used the agencies’ obligations data to represent spending for the programs because 

spending data were not readily available from each of the agencies. Obligations provided 

a reasonable measure of the spending for the programs in each year.

The 

Department of Homeland Security also had an STTR program in FY 2006 

and 2007. However, the agency was not required to participate, because 

its extramural R&D budget for each of those years was actually below the 

$1 billion threshold required for participation in the STTR program. The 

agency stated it had inadvertently used an incorrect extramural budget 

amount to determine its participation requirement. Since the agency was 

not required to participate in STTR and therefore had no spending 

requirement, no figure is included here for its STTR expenditures.

Appendix I: Comparison of Participating 

Agencies’ Reported Requirements and 

Spending for the SBIR and STTR Programs, 

Fiscal Years 2006 to 2011
Appendix I: Comparison of Participating 

Agencies’ Reported Requirements and 

Spending for the SBIR and STTR Programs, 

Fiscal Years 2006 to 2011

Page 33 GAO-13-421 Small Business Research Programs

Figure 2: Comparison of the Department of Agriculture’s Reported Spending 

Requirements and Spending for the Small Business Innovation Research (SBIR) 

Program, Fiscal Years 2006 to 2011
Appendix I: Comparison of Participating 

Agencies’ Reported Requirements and 

Spending for the SBIR and STTR Programs, 

Fiscal Years 2006 to 2011

Page 34 GAO-13-421 Small Business Research Programs

Figure 3: Comparison of the Department of Commerce’s Reported Spending 

Requirements and Spending for the Small Business Innovation Research (SBIR) 

Program, Fiscal Years 2006 to 2011
Appendix I: Comparison of Participating 

Agencies’ Reported Requirements and 

Spending for the SBIR and STTR Programs, 

Fiscal Years 2006 to 2011

Page 35 GAO-13-421 Small Business Research Programs

Figure 4: Comparison of DOD’s Reported Spending Requirements and Spending for 

the Small Business Innovation Research (SBIR) Program, Fiscal Years 2006 to 2011

Note: Although the statutory requirement for agencies is to spend an amount equivalent to the annual 

spending requirement within each year, DOD officials said the agency spends approximately the full 

annual spending requirement over a 2-year period.
Appendix I: Comparison of Participating 

Agencies’ Reported Requirements and 

Spending for the SBIR and STTR Programs, 

Fiscal Years 2006 to 2011

Page 36 GAO-13-421 Small Business Research Programs

Figure 5: Comparison of the Department of Education’s Reported Spending 

Requirements and Spending for the Small Business Innovation Research (SBIR) 

Program, Fiscal Years 2006 to 2011
Appendix I: Comparison of Participating 

Agencies’ Reported Requirements and 

Spending for the SBIR and STTR Programs, 

Fiscal Years 2006 to 2011

Page 37 GAO-13-421 Small Business Research Programs

Figure 6: Comparison of the Department of Energy’s (DOE) Reported Spending 

Requirements and Spending for the Small Business Innovation Research (SBIR) 

Program, Fiscal Years 2006 to 2011

Note: DOE officials said that their annual reports to the Small Business Administration (SBA) did not 

include spending for Supplemental Phase II Awards or for Technical Commercial Assistance and that 

adding this spending eliminates under spending during this period. They also said SBA’s annual 

report format does not include a place to report technical assistance spending. DOE supplied this 

additional information, which we incorporated into our analysis,
Appendix I: Comparison of Participating 

Agencies’ Reported Requirements and 

Spending for the SBIR and STTR Programs, 

Fiscal Years 2006 to 2011

Page 38 GAO-13-421 Small Business Research Programs

Figure 7: Comparison of the Department of Health and Human Services’ Reported 

Spending Requirements and Spending for the Small Business Innovation Research 

(SBIR) Program, Fiscal Years 2006 to 2011
Appendix I: Comparison of Participating 

Agencies’ Reported Requirements and 

Spending for the SBIR and STTR Programs, 

Fiscal Years 2006 to 2011

Page 39 GAO-13-421 Small Business Research Programs

Figure 8: Comparison of the Department of Homeland Security’s Reported 

Spending Requirements and Spending for the Small Business Innovation Research 

(SBIR) Program, Fiscal Years 2006 to 2011

Note: DHS officials said the extramural budget reported in the agency’s fiscal year 2006 annual report 

to SBA was incorrect and they planned to submit a corrected annual report. They said with the 

resulting corrected spending requirement, the fiscal year 2006 spending exceeded the spending 

requirement. DHS provided us with revised information, which we incorporated into our analysis.
Appendix I: Comparison of Participating 

Agencies’ Reported Requirements and 

Spending for the SBIR and STTR Programs, 

Fiscal Years 2006 to 2011

Page 40 GAO-13-421 Small Business Research Programs

Figure 9: Comparison of the Department of Transportation’s Reported Spending 

Requirements and Spending for the Small Business Innovation Research (SBIR) 

Program, Fiscal Years 2006 to 2011
Appendix I: Comparison of Participating 

Agencies’ Reported Requirements and 

Spending for the SBIR and STTR Programs, 

Fiscal Years 2006 to 2011

Page 41 GAO-13-421 Small Business Research Programs

Figure 10: Comparison of the Environmental Protection Agency’s (EPA) Reported 

Spending Requirements and Spending for the Small Business Innovation Research 

(SBIR) Program, Fiscal Years 2006 to 2011

Note: EPA officials said the extramural budget reported in its fiscal year 2006 annual report to SBA 

was incorrect and they planned to submit a corrected annual report. They said with the resulting 

corrected spending requirement, the fiscal year 2006 spending exceeded the spending requirement. 

EPA provided us with revised information, which we incorporated into our analysis.
Appendix I: Comparison of Participating 

Agencies’ Reported Requirements and 

Spending for the SBIR and STTR Programs, 

Fiscal Years 2006 to 2011

Page 42 GAO-13-421 Small Business Research Programs

Figure 11: Comparison of National Aeronautics and Space Administration’s (NASA) 

Reported Spending Requirements and Spending for the Small Business Innovation 

Research (SBIR) Program, Fiscal Years 2006 to 2011
Appendix I: Comparison of Participating 

Agencies’ Reported Requirements and 

Spending for the SBIR and STTR Programs, 

Fiscal Years 2006 to 2011

Page 43 GAO-13-421 Small Business Research Programs

Figure 12: Comparison of the National Science Foundation’s (NSF) Reported 

Spending Requirements and Spending for the Small Business Innovation Research 

(SBIR) Program, Fiscal Years 2006 to 2011

Note: NSF officials said that the larger gap between spending requirements and spending in fiscal 

year 2009 was due to the additional funds made available by the American Recovery and 

Reinvestment Act of 2009 in June, after most of the NSF’s awards had been made in the two funding 

cycles that fiscal year. The act’s funding was subsequently used for the proposals submitted in 

response to the fiscal year 2010 solicitations.
Appendix I: Comparison of Participating 

Agencies’ Reported Requirements and 

Spending for the SBIR and STTR Programs, 

Fiscal Years 2006 to 2011

Page 44 GAO-13-421 Small Business Research Programs

Figure 13: Comparison of DOD’s Reported Spending Requirements and Spending 

for the Small Business Technology Transfer (STTR) Program, Fiscal Years 2006 to 

2011

Note: Although the statutory requirement for agencies is to spend an amount equivalent to the annual 

spending requirement within each fiscal year, DOD officials said the agency spends approximately 

the full annual spending requirement over a 2-year period by carrying over a portion of each year’s 

funds to the following year.
Appendix I: Comparison of Participating 

Agencies’ Reported Requirements and 

Spending for the SBIR and STTR Programs, 

Fiscal Years 2006 to 2011

Page 45 GAO-13-421 Small Business Research Programs

Figure 14: Comparison of the Department of Energy’s (DOE) Reported Spending 

Requirements and Spending for the Small Business Technology Transfer (STTR) 

Program, Fiscal Years 2006 to 2011

Note: DOE officials said that their annual reports to SBA did not include spending for Supplemental 

Phase II Awards or for Technical Commercial Assistance and that inclusion of these result in no 

under spending during this period. They also said SBA’s annual report form does not include a place 

to report technical assistance spending. DOE provided us with revised information, which we 

incorporated into our analysis,
Appendix I: Comparison of Participating 

Agencies’ Reported Requirements and 

Spending for the SBIR and STTR Programs, 

Fiscal Years 2006 to 2011

Page 46 GAO-13-421 Small Business Research Programs

Figure 15: Comparison of the Department of Health and Human Services’ (HHS) 

Reported Spending Requirements and Spending for the Small Business 

Technology Transfer (STTR) Program, Fiscal Years 2006 to 2011
Appendix I: Comparison of Participating 

Agencies’ Reported Requirements and 

Spending for the SBIR and STTR Programs, 

Fiscal Years 2006 to 2011

Page 47 GAO-13-421 Small Business Research Programs

Figure 16: Comparison of National Aeronautics and Space Administration’s (NASA) 

Reported Spending Requirements and Spending for the Small Business 

Technology Transfer (STTR) Program, Fiscal Years 2006 to 2011
Appendix I: Comparison of Participating 

Agencies’ Reported Requirements and 

Spending for the SBIR and STTR Programs, 

Fiscal Years 2006 to 2011

Page 48 GAO-13-421 Small Business Research Programs

Figure 17: Comparison of the National Science Foundation’s (NSF) Reported 

Spending Requirements and Spending for the Small Business Technology Transfer 

(STTR) Program, Fiscal Years 2006 to 2011
Appendix II: Analysis of Alternative Scenarios 

for Basing SBIR and STTR Spending 

Requirements on Total R&D Budget

Page 49 GAO-13-421 Small Business Research Programs

To calculate the expenditure requirements for the SBIR and STTR 

programs, we used two key variables: (1) the “base,” which is the 

research and development (R&D) funding from which the requirement is 

calculated, and (2) the percentage that is applied to that base. For 

example, for fiscal years 2006 to 2011, the base for SBIR and STTR 

funding is the extramural R&D budget, and the mandated percentages 

applied to that base were 2.5 and 0.3 percent, respectively. We tested 

three alternative scenarios that vary the percentage applied to the total 

R&D budget to illustrate the potential effects of changing the methodology 

to calculate agencies’ SBIR and STTR expenditure requirements.1

• For scenario 1, we applied the same percentages for the expenditure 

requirements under the current law to the total R&D budget instead of 

the extramural R&D budget.

The 

scenarios analyzed were as follows:

• For scenario 2, using fiscal year 2006 numbers as our base, we 

determined the percentage to apply to the total R&D budget of all 

participating agencies for fiscal years 2006 through 2011 that would 

hold the total expenditure requirement constant for the programs.

• For scenario 3, using fiscal year 2006 numbers as our base, we 

determined the percentage to apply to the total R&D budget of each 

individual agency for fiscal years 2006 through 2011 to hold each 

individual agency’s expenditure requirement constant for the 

programs.

See the details of the three scenarios and current law in table 5, and their 

effects on spending requirements are in table 6.

 

1

There are many other alternatives that we could have selected for this analysis; we 

selected these three alternatives to provide examples of how the expenditure 

requirements for the programs could change if Congress chose to change the 

methodology for calculating the requirements.

Appendix II: Analysis of Alternative 

Scenarios for Basing SBIR and STTR 

Spending Requirements on Total R&D Budget
Appendix II: Analysis of Alternative Scenarios 

for Basing SBIR and STTR Spending 

Requirements on Total R&D Budget

Page 50 GAO-13-421 Small Business Research Programs

Table 5: Summary of Alternative Scenarios to Illustrate the Potential Effects of 

Calculating Small Business Innovation Research (SBIR) and Small Business 

Technology Transfer (STTR) Program Expenditure Requirements on an Agency’s 

Total R&D Budget Instead of Its Extramural R&D Budget

Percentage applied to the base

Scenario Base SBIR STTR

Current law Extramural R&D budget 2.5% 0.3%

Scenario 1 Total R&D budget 2.5% 0.3%

Scenario 2 Total R&D budget 1.6% 0.2%

Scenario 3 Total R&D budget a b

Source: GAO analysis of agencies’ data.

a

This would vary by agency from 0.5 percent to 2.5 percent

b

This would vary by agency from 0.1 to 0.3 percent

Note: 2006 was selected as the base year from which to determine the new percentage to apply to 

the total R&D budget to more clearly show how the funding for the SBIR and STTR programs would 

be distributed across federal agencies.

Table 6: Comparison of Fiscal year 2011 Small Business Innovation Research (SBIR) Spending Requirements under the 

Current Law and the Three Alternative Scenarios

Dollars in millions

Agency’s 

extramural 

R&D budgeta

Agency’s total 

R&D budget 

authorityb

SBIR spending 

requirement under 

current lawc

(Scenario 1)

SBIR spending 

requirement 

based on 2.50 

percent of the 

total R&D budget 

(Scenario 2) 

SBIR spending 

requirement 

based on 1.63 

percent of the 

total R&D budget

(Scenario 3) 

SBIR spending 

requirement 

based on variable 

percentages by 

agency

USDA $768 $2,284 $19 $57 $37 $21

Commerce 239 1,021 6 26 17 7 

DOD 41,678 77,410 1,042 1,935 1,262 1,195

Education 346 362 9 9 6 9 

DOE 5,857 9,915 146 248 162 137

HHS 24,714 31,099 618 777 507 637

DHS 468 512 12 13 8 13

DOT 384 929 10 23 15 4 

EPA 182 584 5 15 10 9 

NASA 4,998 8,839 125 221 144 102

NSF 4,956 5,091 124 127 83 121

Total $84,590 $138,046 $2,116 $3,451 $2,250 $2,255

Sources: GAO analysis of agencies’ data.

a

Each agency’s extramural R&D budget as reported by the agencies in their annual reports to SBA.
Appendix II: Analysis of Alternative Scenarios 

for Basing SBIR and STTR Spending 

Requirements on Total R&D Budget

Page 51 GAO-13-421 Small Business Research Programs

b

Each agency’s total R&D budget authority is from the Analytical Perspectives volume of the 

President’s budget.

c

Each agency’s SBIR spending requirement was calculated under the current law in fiscal year 2011 

as 2.5 percent of its extramural R&D budget.

Note: Calculations may be affected by rounding.
Appendix III: Description of SBIR and STTR 

Administrative Cost Data Obtained from the 

Participating Agencies

Page 52 GAO-13-421 Small Business Research Programs

The following describes the administrative cost data obtained, identified, 

or not available from the participating agencies for fiscal year 2011.

• Department of Commerce (Commerce): Officials with the two 

participating subunits, the National Institute of Standards and 

Technology (NIST) and the National Oceanic and Atmospheric 

Administration (NOAA), said that the administrative costs for the 

program included salaries and expenses but that they did not have an 

estimate of them. The officials said the agencies did not specifically 

track administrative costs. Such costs were not allowed to be charged 

against the SBIR funds.

• Department of Homeland Security (DHS): Officials in DHS’ Science 

and Technology Directorate, which is one of two subunits managing 

the SBIR program at DHS, provided a partial list of administrative 

costs for the fiscal year. These included salary, travel, and other costs 

(e.g. contracting fees, support contracts and audit costs) that were 

estimated at $962,000. Categories of costs that the agency identified 

but did not estimate included salaries and expenses of other DHS 

supporting staff and contractors. DHS officials in the Science and 

Technology Directorate said that the directorate’s management and 

administrative budget began fully funding the administrative costs for 

SBIR in 2011; previously, these costs were funded from the 

extramural R&D budget of the directorate. The other DHS unit with an 

SBIR program, the Domestic Nuclear Detection Office did not identify 

or estimate administrative costs.

• DOD: Agency officials said that while DOD had not tracked 

administrative costs of the SBIR or STTR programs through 2011 

agency-wide, such costs had been reported to various extents by the 

13 DOD subunits that participate in one or both of the programs. 

Based on reports from some subunits, DOD’s partial administrative 

costs totaled $30.2 million. The 13 DOD subunits varied in their 

identification of administrative costs. Some identified none; some 

identified a few; and others identified many categories but did not 

provide estimates for each cost category. DOD Office of Small 

Business Programs officials stated that the department did not track 

“non-legislated administrative expenses,” which were described as the 

program administrative costs before the start of the administrative 

costs pilot program.

• Department of Energy (DOE): Agency officials in the DOE Office of 

Science, which manages most of the SBIR and STTR programs in 

DOE, said administrative costs for these programs were in three 

Appendix III: Description of SBIR and STTR 

Administrative Cost Data Obtained from the 

Participating Agencies
Appendix III: Description of SBIR and STTR 

Administrative Cost Data Obtained from the 

Participating Agencies

Page 53 GAO-13-421 Small Business Research Programs

categories: salaries and benefits, support contracts, and travel, and 

totaled $1.2 million in fiscal year 2011. According to these officials, 

these costs did not include personnel expenses for over 70 specialists 

who spend a fraction of their time on the programs.

• Department of Transportation (DOT): Agency officials said 

administrative costs in fiscal year 2011 were estimated at $363,000, 

primarily for salaries and expenses but also including travel and other 

smaller categories. These program managers said this represents 

part of its administrative costs that directly support the SBIR 

program’s management but not other support activities like 

procurement and legal services that are provided by other DOT 

subunits.

• Department of Education (Education): Agency officials estimated 

administrative costs for fiscal year 2011 totaled $479,000, of which 

$4,000 was for travel, $174,000 for salaries and benefits of 

department employees who administer the program, including 

preparing solicitations, running competitions, performing oversight, 

congressional reporting, and monitoring awards. Officials said the 

2011 total included $38,000 for salary and benefits of the department 

contracts and acquisitions management staff, and $263,000 for salary 

and benefits of personnel assisting with application reviews.

• Environmental Protection Agency (EPA): Agency officials said that 

known administrative costs for fiscal year 2011 were $953,000, which 

included $533,000 for the salaries and expenses of four FTE staff that 

run the program, $350,000 for external peer review of SBIR proposals 

at various funding phases, and $70,000 for a contract to provide 

program support. Officials said there were other administrative costs 

that were associated with staff that also manage other grant programs 

and that these costs were not easily separated by program and they 

were not tracked.

• Department of Health and Human Services (HHS): Agency officials 

said they do not track or report the amount of administrative costs for 

the SBIR and STTR programs. They said it would be very difficult to 

determine how much is currently spent on the administrative costs of 

the program. HHS officials reported that since authorizing legislation 

did not allow SBIR/STTR funds to be spent on administration, funding 

for administrative costs, such as salary and expenses, training and 

travel, comes from other accounts.
Appendix III: Description of SBIR and STTR 

Administrative Cost Data Obtained from the 

Participating Agencies

Page 54 GAO-13-421 Small Business Research Programs

• National Aeronautics and Space Administration (NASA): Agency 

officials estimated administrative costs for certain categories as 

roughly $11.9 million in fiscal year 2011, which included, among other 

things, $8.6 million for procurement costs, about $3 million for salaries 

and expenses, and $151,000 for travel. According to these officials, 

other identified unestimated and untracked costs to administer the 

SBIR and STTR programs include the costs of technical experts 

within NASA reviewing proposals, the cost of holding review panels, 

and the cost that technical and contracting representatives spend 

interacting with companies seeking and receiving funding.

• National Science Foundation (NSF): Agency officials said they 

identified administrative costs of $4 million for the SBIR and STTR 

programs. These include 10 FTE within the agency costing 

approximately $2 million in salaries and benefits and $2 million NSF 

designates from its extramural research and spends for SBIR and 

STTR administrative costs, primarily for contracted technical and 

administrative support. NSF has contracted for this support for many 

years because of the high volume of actions in the program and the 

time frames that need to be met in the process. NSF officials said 

there were other administrative costs, including the efforts of federal 

staff that devote substantial time to the programs, but these have not 

been tracked or estimated.

• U.S. Department of Agriculture (USDA): Agency officials said that in 

fiscal year 2011 administrative costs for SBIR included $184,000 for 

experts who provided peer review of project proposals to cover such 

costs as honoraria and travel. Officials said USDA does not break out 

administrative costs for the SBIR program beyond honoraria and 

travel. 
Appendix IV: GAO Contact and Staff 

Acknowledgments

Page 55 GAO-13-421 Small Business Research Programs

Frank Rusco, (202) 512-3841 or ruscof@gao.gov

In addition to the individual named above, Tim Minelli, Assistant Director; 

Hilary Benedict; Antoinette Capaccio; Cindy Gilbert; Richard Johnson; 

Cynthia Norris; John Scott; Ilga Semeiks; and Vasiliki Theodoropoulos 

made key contributions to this report.

Appendix IV: GAO Contact and Staff 

Acknowledgments 

GAO Contact:

Staff 

Acknowledgments 

(361396)
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